SHRI ASHWANI KUMAR, AMRITSAR V. INCOME TAX OFFICER WARD-1, BATALA

ITA 189/ASR/2023

AI Insights

The case revolves around the appeal filed by Ashwani Kumar against the order of the Commissioner of Income-tax (Appeals) - NFAC, Delhi, which was initially based on the order passed by the ADIT, CPC, Bengaluru under section 143(1) of the Income-tax Act, 1961. The primary contention was the incorrect addition of the assessee's share of loss from a partnership firm, M/s. J D Trading House, amounting to Rs. 2,50,022, to his business income. The assessee argued that this loss, which was not claimed as a deduction in the return of income, was erroneously added by the CPC, Bengaluru, leading to an incorrect assessment of income and an unjust demand for tax. The Tribunal found that the loss from the partnership firm, which is exempt under section 10(2A) of the Act, should not have been included in the total income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114797 (ITAT-AMRITSAR)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-07-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 25-06-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHIT KUMAR NIGAM
• Keywords: Business income; Opportunity of being heard; Principle of natural justice
• Section: 10; 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 Ashwani Kumar C/o Bhadwar Food Products, Dera Baba Nanak Road, Fatehgarh Churian, Amritsar. [PAN: -ANRPK4353L] (Appellant) Vs. IncomeTaxOfficer,Ward- 1, Batala. (Respondent) Appellant by Sh. Vinamar Gupta, CA. Respondent by Sh. Mohit Kumar Nigam,Sr.DR. Date of Hearing 01.08.2023 Date of Pronouncement 04.08.2023 ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income-tax (Appeals)-NFAC, Delhi, (in brevity ‘the CIT (A)’) order passed u/s 250 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2020-21. The impugned order was emanated from the order of the ld. ADIT,CPC, Bangaluru, (in brevity the ld. AO) order passed u/s 143(1) of the Act. I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 2 2. The assessee has taken the following grounds: “1. That the Learned CIT (A) has erred in law and facts and circumstances of the case by adding the share of loss from partnership firm to the total of income of assessee inspite of the fact that the same has not been claimed as business loss in return of income filed by the assessee. 2. That the Learned CIT (A) has erred in law by passing the order without giving opportunity of being heard to the assessee which is against Principles of Natural justice. 3. That the Learned CIT(A) has erred in law and facts of the case by dismissing the appeal by doing incorrect interpretation of intimation u/s. 143 (1) and considering incorrect amount of income from Business and Profession of Assessee on the basis of wrong premise. 4. That the appellant craves leave to add; alter, amend or vary the grounds of appeal here in above at or before hearing of appeal.” 3. The ld. AR filed an adjournment petition before the bench and prayed for adjournment, but considering the issue and gravity of the case, finally, the ld. AR proceed for hearing and withdraw the adjournment petition. 4. Brief fact of the case is that the assessee was filed the return on 14/01/2021 and declaring Total Income of Rs. 4,87,630 /- for A.Y. 2020-21. As per Return of Income filed by the assessee, the assessee earned business income I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 3 of Rs. 548219/- in the impugned assessment year from his prop. Business Badhwar Food Products. The assessee also earned under the head Income from other sources, the bank interest from FDR amounting to Rs.25070/-. So, Gross total income was calculated amount of Rs. 573289/- which was declared by the assessee in ROI. 4.1 The assessee also declared in his return of income share of loss accumulated from partnership firm, M/s. J D Trading House amounting to Rs. 2,50,022/- but did not claim any deduction on account of this from Gross Total income. As the share of profit from partnership firm is exempt u/s. 10 (2A) of the Act. 4.2 On 08/12/2021, the assessee received intimation U/s 143(1) and demand was calculated amount of Rs. 77,320/- from CPC in which the business income of the assessee was computed by the CPC amount to Rs.7,98,243/-in which share of loss from M/s J D Trading amounting to Rs. 2,50,022/- was added with business income. 4.3 So, share of loss from partnership firm amounting to Rs. 2,50,022/- which was not even claimed as business loss in return of income filed by the assessee was added to the income of the assessee. 4.4 The present appeal is being filed against the order of CPC for addition of share of loss from firm i.e. Rs.2,50,022 in the total income of the assessee and I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 4 creating a demand of Rs. 77,320. Being aggrieved the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) adjudicated the issue and upheld the order of the ld. AO. Being aggrieved assessee filed an appeal before us. 5. The ld. AR vehemently argued and submitted that the assessee is a partner of M/s J. D. Trading House and the share of loss from partnership firm was Rs.2,50,022/- which was claimed in Schedule VI in the return in column ‘Business Profession’. The income or loss from the partnership firm is exempted u/s 10 (2A) of the Act. In any case, the amount should be not the part of total income. So, the addition Rs.2,50,022/- is liable to be deleted. 6. The ld. DR vehemently argued and relied on the order of the ld. CIT(A) para no. 5 of the appeal order is extracted as below: “5. After careful consideration of appellant’s submissions and keeping in view of the facts of case involving passing of order u/s. 143(1) by the A.O (CPC), Bangalore etc., it is observed that the appellant is claiming that the appellant’s share of loss from another partnership firm, M/s. J.D. Trading amounting to Rs. 2,50,022/- has been added to appellant’s business income of Rs. 5,48,219/- and same has resulted in incorrect assessing of income by the A.O., CPC, Bengaluru as claimed by the appellant. On further perusal, it is observed that the A.O., CPC, Bengaluru has considered share of income from firm at a loss of Rs. 2,50,022/- as at Col. No.5 of Annexure - Business and profession of 143(1) order dated 8.12.2021. Accordingly, while I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 5 adjusting the same as at Col.No.6, the same has been added to the total income of the assessee as at Col.No.6 under the same annexure as it involves a loss of Rs. 2,50,022/- having credited to P&L Account which resulted in net business income of Rs. 5,48,219/- as admitted by the appellant in the Return of Income i.e. to say alternatively appellant’s total income of Rs. 7,98,241/- under business and profession stands reduced on account of credit of this loss from other firms to the P&L A/c. thereby reducing net income to Rs. 5,48,219/- and same is admitted by the appellant in the Return of Income. With reference to this, appellant merely claims that this share of loss from another firm M/s. J.D. Trading was not even claimed as business loss in Return of Income filed and accordingly, such addition by the A.O., (CPC) Bengaluru in the 143(1) order is claimed as not maintainable by the appellant. The appellant’s claims on this analogy is neither arithmetically reconcilable nor factually justified by the appellant with supporting proof of such P&L Account resulting in net income of Rs.5,48,219/- and reconciling that this share of loss of Rs.2,50,022/- from other firm having not credited to such P&L A/c which resulted in this net income of Rs. 5,48,219/-. In the absence of appellant’s supporting proofs of such income computation with relevant P&L account it would be improper on the part of the appellant to contend that this share of loss as not claimed by the appellant in the Return of Income filed. Once appellant claimed any loss as credited in the P&L A/c, it has the effect of reducing the gross/net income out of such P&L A/c, Accordingly, the I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 6 same do not warrant to claim again in the Return of Income computation as the same stands claimed already in the P&L Account as a credit entry of such loss income. In the light of these observations, as the appellant failed to establish the same with supporting proofs of such loss having not claimed in the relevant P&L Accounts, it would be improper on the part of the appellant to hold to the view, that the same is mistakenly added by the A.O., CPC, Bengaluru when such adjustments are indeed taken from the claims of appellant in their ITR involving P&L Account, Balance Sheet entries etc., as filed by the appellant. Accordingly, appellant’s appeal and its grounds of appeal on this issue are neither maintainable nor justified without supporting total income computation as claimed by the appellant with relevant books of accounts of Profit & Loss A/c., Balance sheet etc., as applicable to the appellant’s facts of case of business. Accordingly, appellant’s Grounds of appeal are not allowable and appellant’s appeal is dismissed as not maintainable, as these involves no apparent mistake on the part of AO, CPC, Banguluru, as not evidenced by the appellant with supporting workings/proofs of such P & L account credit entries, having no loss income of other firms of appellant.” 7. We heard the rival submission and relied on the documents available in the record. The assessee claimed in the return the business loss from partnership firm amount to Rs.2,50,022/-. The profit or loss of partner from the partnership firm is exempted u/s 10(2A) of the Act. So, the same amount cannot be part of the total income. During process of the return the ld. AO added this loss with I.T.A. No. 189/Asr/2023 Assessment Year: 2020-21 7 the business income amount to Rs.5,48,219/- and total income is re-computed amount to Rs.7,98,243/-. In the return, the assessee claimed share of income from firm which is exempted. If the addition made on the total income the share of profit or loss should be deducted by pursuing section 10(2A) of the Act. In any case, the assessee had not made any mistake during filing the return or not claimed any wrong deduction in this impugned assessment year. Accordingly, the order passed by the revenue authorities, are duly setting aside and the demand which is raised u/s 143(1) is quashed. The addition amount of Rs.2,50,022/- is dismissed. 8. In the result, appeal of the assessee ITA No. 189/ASR/2023 is allowed. Order pronounced in the open court on 04.08.2023 Sd/- Sd/ (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order